How Does a Short Sale Effect My Credit Score?
The question is not as easy to answer as we would all like to think. Credit scores are determined in a variety of ways, and there is no way a blog post is going to get you 100% up to date on it. There are a few things you do need to know first...
There are 3 credit bureaus that calculate your credit score. In Alabama, you are entitled to 1 free report from all 3 of them every year. This is so you can check your report for accuracy.
The 3 agencies that track your credit for the lending institutions are: Experian, Transunion and Equifax. The 3 Credit Bureaus run a website called Annualcreditreport.com You can order your free reports from this site.
OK, now onto the effect a Short Sale has on your credit score. According to Fair Isaac, the short sale will damage your credit score just as much as a foreclosure (200-300 points, depending on other credit factors). The good news though, is a person who is foreclosed on will wait no more than 2 years to be offered a reasonable interest rate to buy a new home, where a foreclosure victim can count on waiting 3-5 years before buying another home.
The effect of a short sale on your credit score in Alabama is indeed severe, but not as bad as the effect of a foreclosure on your credit score.
In other words... if you are trying to decide between a short sale or a foreclosure, don't be so quick to just say "the effect of a short sale on my credit score is the same as the effect of a foreclosure". There are other differences, including when you will be eligible for another home, and possibly even more important... if you are foreclosed on, the bank can (and probably will) come after you for the amount of money they lose (the difference between what you owe and what they sold the property for).
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